Entrepreneurship isn’t a Union Job

I’ve run into a number of people recently who have announced that they “only” need to make $24,000 or $36,000 or $50,000 or whatever number it is with their self-employed work to be comfortable.

Unfortunately, they’re both right…and very, very wrong.

When you’re self-employed as an artist, an entrepreneur, or an artist-entrepreneur, your entire financial foundation is far, far less stable than that of people who have regular jobs, and worse, you have far more expenses. I see far too many people quitting day jobs when their gross revenues equal their paycheck. Now, that can be a calculated risk. You can realize that’s only a starting place and you need to move forward from there to have anything like financial security. Or it can be reckless self-deception.

I’ve been in the publishing business long enough that it was a traditional-only game when I started. The vicissitudes were, if anything, even worse then because all it took was some lazy jerk in marketing to decide that he’d rather go home early on Friday than take care of your book, and your career could be destroyed. I’m not exaggerating or joking. My particular Big 5 publishing imprint was known for distribution randomly “breaking,” destroying the launch numbers and so the careers of writers. Very, very few of the writers who rode high on the lists in 2005 are anywhere to be seen on them in 2015. Something like 60% of authors who have a book hit the NY Times bestseller lists never have another bestseller. And I think it’s safe estimate that 80% who hit multiple times disappear off all lists within 10 years.

It’s just as unstable in the midlist, if not more so, because authors there don’t just sell less, they disappear entirely. Most writers get only one contract ever. Most of the rest are also gone entirely within 10 years, their careers thoroughly over. And they have to start from square one again.

Things are a bit better if you’re an indie writer. For one thing, you can sell much more on your own merits and talent. Not depending on the marketing machine of others means that you don’t get that machine’s benefit, but it also means that it can’t eat you alive. Even so, you won’t find more than a handful of indie writers making a full-time living who don’t talk wistfully of their bestselling series–the series that their other books never manage to quite touch.

Algorithms also change. You can lose visibility in a heartbeat. Amazon shook up its algorithms this summer, and thousands of books that had been pegged at steady sales numbers for a year or more suddenly fell off the charts.

Bottom line: This is a business with a lot of ups and downs, no matter how you’re published. The benefits of indie publication are in the higher percent you get to take home, so you get to determine where marketing and production money is spent, and in your ability to react quickly to the market. But there are going to be hard times. Often brutally hard times. There are ways of offsetting them, minimizing them, that a lot of smart indies do. But there will still be years that kick you in the teeth.

These are the years that you should plan for.

Self-employment isn’t a union job. There is no pension. No benefits. No job security. If the bottom drops out, you can’t walk into another job just like it in 3, 6, 12 months. You have to rebuild everything from the ground up.

So what do you do?

I recommend strongly that you pay into your company first–that’s production and marketing. Second, pay your heath care. Third, save for retirement, because taxes are brutal when you’re self-employed. Third, save up for bad years. And fourth, live on the rest.

If you need the equivalent of a $36,000-a-year job to live on comfortably, then you should budget AT LEAST these in addition to the $36,000:

$7,000 in business expenses

$4,000 for tax-advantaged retirement

$3,000 for a single person’s health insurance

$7,000 in savings against future bad years

$4,000 for additional taxes

So that’s $57,000 that you need to make to live like you’re making $36,000–and even then, I’d be nervous about such a low rate of savings in such a volatile industry.

There is a very fine line between just meeting needs and debt and bankruptcy, and it’s a line that many, many artists, freelancers, and entrepreneurs cross by overestimating how stable their incomes will be and underestimating the expenses of self-employment.